OUR TAKE: The SEC is leveraging the Bank Secrecy Act, adopted to combat money laundering, to require broker/custodians to police advisers on their platforms for violations of the Advisers Act. It’s a novel legal theory to further the regulator’s enforcement goal of requiring large securities markets participants to serve in a gatekeeping role for the industry.

The SEC has sued a lawyer for aiding and abetting securities fraud by preparing a registration statement that failed to disclose that the principal was a convicted felon that controlled the issuer. According to the SEC, the principal instructed the lawyer that he should not be named as an officer or director of the issuer because of his prior conviction. Nevertheless, according to the SEC, the lawyer knew that the principal fully controlled the issuer and failed to include such disclosure in the Form S-1. The SEC also charges that the lawyer knew or was severely reckless in not knowing that the three persons listed as officers and directors had not agreed to serve.

OUR TAKE: The SEC will hold gatekeepers, including lawyers, accountable for their bad clients. This case goes further than prior enforcement cases by prosecuting a lawyer for reckless conduct rather than knowingly furthering a specific fraud.